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To: TFF who wrote (10783)	4/28/2003 3:18:04 PM
From: TFF	Respond to of 12617

U.S. Regulators Finalize $1.4 Billion Wall St. Settlement By THE ASSOCIATED PRESS ASHINGTON -- Federal and state regulators on Monday released details of a settlement in which ten of Wall Street's biggest investment firms will pay at least $1.4 billion and adopt reforms to resolve allegations that they issued biased ratings on stocks to lure investment-banking business. It calls for one of the largest penalties ever levied by securities regulators and will change the way major investment firms -- including Citigroup, Merrill Lynch and J.P. Morgan Chase -- do business. Financial-services giant Citigroup, for example, will pay $400 million in fines and for funds to promote better research under the settlement, which is based on a tentative agreement reached in December. The accord was being announced at the Securities and Exchange Commission's headquarters in Washington, following approval of the deal in recent days by the five SEC commissioners. Under the settlement, two former star analysts -- Internet expert Henry Blodget of Merrill Lynch and telecommunications analyst Jack Grubman of Citigroup's brokerage business, Salomon Smith Barney -- have agreed to pay $19 million in fines and penalties and be banned permanently from the securities industry to settle fraud charges. Blodget and Grubman are neither admitting nor denying any wrongdoing. Grubman will pay $15 million for undisclosed alleged conflicts and charges that the firm engaged in improper distribution of shares in newly public companies to favored clients. He faces a lifetime ban from working for an investment firm or acting as an investment adviser, dealer or broker. His penalty can't be reimbursed or indemnified and the penalty portion can't be written off on taxes. Blodget will pay $4 million. The settlement with the brokerage firms will require that certain analysis from an investment house would have to be made public within 90 days after each quarter concludes to allow investors to compare the performance of analysts from different firms and promote objective rankings. Brokerages will also be banned from allocating to executives and board directors preferential access to initial public offering shares of firms they have courted as investment banking clients. An independent monitor will be assigned to each firm to make sure the terms of settlement are met. An $85 million investor education program is also being created at the expense of the brokerages. Brokerages would pay $450 million over five years into the independent research fund. The firms neither admitted nor denied allegations that they had misled investors, although Citigroup agreed to a statement of "contrition." The investigation was based on internal e-mails in which the firms' financial analysts privately derided stocks they were touting to the public. Salomon Smith Barney will pay the heaviest fine: $300 million. In addition, parent Citigroup will also provide $75 million toward an independent research fund and $25 million toward an investor education program. But Citigroup CEO Sanford Weill won a guarantee that he would not be prosecuted. The settlement requires Citibank's chief executive to report to separate committees of the board of directors on the objectivity, independence and quality of research. No executive can be part of the meetings. Regulators alleged that Citigroup published fraudulent and misleading research that promoted banking clients and harmed investors while ignoring strong criticism from inside the company about the quality of research. At Morgan Stanley Co., regulators found the firm failed to manage conflicts of interests between its investment banking and research divisions and failed to properly supervise senior researchers including Mary Meeker, the top telecommunications stock analyst. Morgan Stanley will pay a $50 million penalty as well as $75 million toward the independent research fund. Credit Suisse First Boston will pay $150 million in the settlement. Goldman Sachs, J.P. Morgan Chase, Bear Stearns, Lehman Brothers, Deutsche Bank and UBS Paine Webber will each pay $50 million. Last May, Merrill Lynch, the nation's largest brokerage, agreed to a separate settlement that included a $100 million fine and the separation of its analysts from investment banking. The amounts were based on evidence collected against the firms, according to officials. ------